BT Group PLC's latest update shows progress on fibre installations, but revenue pressures continue to drag.
UBS analyst Polo Tang called it a “very weak” quarter on the top line, with earnings only meeting expectations thanks to cost savings.
Group revenue fell 4% in the third quarter to £4.98 billion, missing consensus and the UBS forecast for a 2% decline.
Openreach was the only division showing growth, with a 0.5% rise in revenue and a smaller-than-expected loss of broadband lines. Losses for the full year are now expected at 850,000, better than the 900,000 previously forecast.
“BT shares are above their five-year trading range and we see the valuation as expensive,” said Tang, who has had a ‘sell’ rating on the stock for over a year. “EBITDA is struggling to grow amid top-line pressures.”
The analyst cautioned clients that structural challenges in the UK telecoms market remain: alternative networks now cover 60% of the country, often with prices 20-30% below the big players, while mobile competition is also heating up as fintech brands enter the market and MVNOs gain ground.
Consumer division revenues dropped 1.2%, with average revenues per user falling in both broadband and mobile. Post-paid mobile net adds were stronger than expected at 55,000, but fixed ARPU declined 1% year-on-year.
Business revenues fell 8.3%, hit by disposals and weak trading. BT reiterated its guidance, but UBS questioned whether the group can meet its target of £2 billion in free cash flow by the 2027 financial year.
“Q4 will be an important milestone,” said Tang. “It will be challenging to meet long-term goals without top-line support.”
Shares in BT are up 11% so far this year, but UBS sees limited room for further gains in the absence of revenue growth.